Local Protectionism, Market Structure, and Social Welfare: Chinas - - PowerPoint PPT Presentation

Local Protectionism, Market Structure, and Social Welfare: China’s Automobile Market

Panle Jia Barwick Shengmao Cao Shanjun Li Cornell University June 2016

(Cornell) Local Protectionism June 2016 1 / 50

China’s Economic Growth

Remarkable growth during its transformation to a market economy GDP growth in 2015 was 6.9%, the lowest in 20 years

(Cornell) Local Protectionism June 2016 2 / 50

Economic Growth and Market Frictions

Export has been an important driver of economic growth Recent discussions on strengthening domestic demand as the engine for future growth Examine domestic market frictions that could hinder efficient resource allocation and growth:

◮ Intra-country trade barriers ◮ policies and practices that protect local firms against competition from

non-local firms

(Cornell) Local Protectionism June 2016 3 / 50

Local vs. National Market Shares: Automobiles

0% 5% 10% 15% 20% 25% 30% 35%

Local market shares National market shares The first five are state-owned enterprises (SOE), next five are joint ventures (JV), and last two are private automakers ‘Local market shares’ refer to shares in their respective headquarter provinces

(Cornell) Local Protectionism June 2016 4 / 50

Local vs. National Market Shares: Cigarettes

.2 .4 .6 .8 Anhui Chongqing Fujian Guangdong Guangxi Guizhou Hebei Henan Hubei Hunan Jiangsu Jiangxi Shaanxi Shandong Shanghai Sichuan Yunnan Zhejiang

Local Market Share vs. National Market Share Market Share of Cigarette Products from Major Manufacturers (2007 - 2013)

Local Market Share National Market Share (Cornell) Local Protectionism June 2016 5 / 50

Factors that Contribute to Home Bias

Transportation costs:

◮ About 1-2% of vehicle prices. Controlled using distance

Dealer network:

◮ Local brands might have more dealers in the region ◮ Control the number of dealers, though it is affected by policies

Local preference:

◮ Consumers prefer local brands (information and reputation)

Local protectionism:

◮ Policies that protect local firms against competition from nonlocal firms (Cornell) Local Protectionism June 2016 6 / 50

Local Protectionism: the Auto Industry

Trade war between Shanghai and Hubei province in the 1990s Changchun, Jilin province:

◮ First Auto Works (FAW) is a SOE headquartered in Changchun,Jilin ◮ Local governments in Jilin heavily promote FAW brands ◮ From 2009-2010 – ⋆ Require government procurement to give priority to FAW group ⋆ Waive all fees (including registration fees and tolls) for individual

purchase of FAW brands

◮ From 2012-2013 – ⋆ Subsidize FAW indigenous brands (not JV brands) by 3500-7000 Yuan

Guangxi province (2015):

◮ Subsidy up to 2000 Yuan for local brands (Cornell) Local Protectionism June 2016 7 / 50

Local Protectionism: Institution

China’s political personnel system is top-down:

◮ Local officials are evaluated and promoted based on GDP growth ◮ SOEs are important for local GDP and fiscal revenue

Management:

◮ Top executives of SOEs and JVs (their domestic partner) are appointed

and their management decisions influenced by the government

Rent-seeking:

◮ SOEs often provide private benefits for local government officials

Lack of federal regulations:

◮ No effective central policies that prohibit interregional trade barriers ◮ U.S. Constitution’s Commerce Clause prohibits state regulations that

interfere with or discriminate against interstate commerce

(Cornell) Local Protectionism June 2016 8 / 50

Research Questions

This paper focuses on:

◮ To what extent are the differences between local and national shares

driven by local protectionism?

◮ How does local protectionism affect prices and demand? ◮ What is the welfare impact?

Questions to explore in future research:

◮ The impacts on firm entry and exit, market structure, and capacity

utilization

◮ The impacts on resource allocation across regions and their welfare

consequences

(Cornell) Local Protectionism June 2016 9 / 50

Literature

Existing literature that examines intra-national trade barriers in China:

◮ Young (2000), Bai et al. (2004), Holz (2009), Eberhardt et al. (2015) ◮ They identify protectionism by looking for changes in industry

specialization and price convergence at the aggregate level

◮ We use disaggregate data for one industry that covers all products in

all regions

◮ Ours is the first study to quantify the welfare impacts

Literature on resource allocation and TFP growth:

◮ Hsieh and Klenow (2009) examines misallocation of inputs ◮ We focus on the misallocation in the product market, which could lead

to misallocation of inputs

(Cornell) Local Protectionism June 2016 10 / 50

Overview

1 Introduction 2 Theory 3 Industry Background and Data 4 Empirical Strategy and Results 5 Simulations and Welfare Analysis 6 Conclusion (Cornell) Local Protectionism June 2016 11 / 50

Hotelling Model

A linear city from interval [0,1], uniform distribution of consumers. Consumers have unit demand Two firms: one local (A), one non-local (B). Locating at two extremes and selling identical goods Marginal cost of production: 2cq Transportation cost: td2 where d is the distance Consumer surplus (consumer i choosing j): uij = ¯ u − Pj − td2

ij

(Cornell) Local Protectionism June 2016 12 / 50

Hotelling Model

At point x∗= 1

2: CS and MC from two choices equalized

Equilibrium prices: PA=PB=t(1+2c)

(Cornell) Local Protectionism June 2016 13 / 50

Hotelling with Subsidy to Local Firm

Consumers who buy from local firm (A) receive subsidy S DWL: distortions in consumer choices and production

(Cornell) Local Protectionism June 2016 14 / 50

Overview

1 Introduction 2 Theory 3 Industry Background and Data 4 Empirical Strategy and Results 5 Simulations and Welfare Analysis 6 Conclusion (Cornell) Local Protectionism June 2016 15 / 50

China’s Auto Market: Growth and Size

China overtook the U.S. as the world’s largest auto market in 2009

(Cornell) Local Protectionism June 2016 16 / 50

Industry Background

Market shares for different types of firms:

◮ Joint ventures (JVs, 71%), State owned enterprises (SOEs, 12%), ◮ domestic private firms (10%), and imports (7%)

All major international automakers are present in China as JVs:

◮ By law, foreign automakers cannot have their own production ◮ VW and GM have the largest presence in China

The auto industry is targeted by many government policies:

◮ Important for GDP, employment, and spillovers to other industries ◮ Strategic industry in 26 provinces (out of 31) from 2005 to 2010

Fragmented industry with production capacity in 26 provinces

(Cornell) Local Protectionism June 2016 17 / 50

U.S. and Chinese Auto Markets

U.S. China PV Sales in 2015 (million) 17.5 21.1 Number of Firms 15 60 Capacity Utilization (%) 90 65 Top 6 Market Share (%) 77 46 Top 12 Market Share (%) 94 68 Top 20 Market Share (%) 100 85

U.S. and Chinese Auto Markets in 2015

(Cornell) Local Protectionism June 2016 18 / 50

Production Capacity in China in 2013

All except five provinces have auto production Average annual capacity is 980,000 per province in 2013

(Cornell) Local Protectionism June 2016 19 / 50

Production Capacity in the US in 2013

14 states have production Among them, average annual capacity one million per state

(Cornell) Local Protectionism June 2016 20 / 50

Data

Registration data at the individual vehicle level from 2009 to 2011:

◮ About 30 million observations ◮ Vehicles purchased by individuals: 90% ◮ Vehicles purchased by governments and commercial entities: 10%

Registration county, model name, engine size, vehicle type:

◮ Aggregate to province, model, year: 19624 observations

Other data sets:

◮ Demographic information (income distribution) from 2005 Census ◮ Prices and attributes from Polk and other sources ◮ Auxiliary data sets for gasoline prices, dealership network, etc (Cornell) Local Protectionism June 2016 21 / 50

Summary Statistics

Excluding small and very expensive models, 286 models in 31 provinces during 2009-2011 Variable Mean

• Std. Dev.

Min Max Sales 1250.9 2258.0 1 60612 Real price (1000 Yuan) 186.2 145.9 27.5 798.7 Fuel cost (Yuan/100km) 50.2 10.0 24.9 101.2 Engine size (liter) 1.8 0.5 0.8 4.0 Vehicle size(m2) 7.7 0.9 4.2 10.3 Auto transimission 0.5 0.5 1 SUV 0.2 0.4 1 Minivan 0.1 0.2 1 Number of dealers 19.4 23.3 137 Distance to headquarter (1000km) 2.1 1.4 5.2 Number of observations: 19624

Summary Statistics of Key Attributes

(Cornell) Local Protectionism June 2016 22 / 50

Higher Income HH More Likely to Buy Cars

Year ≤ 4k 4k-8k 8k-12k ≥ 12k Among All Households 2009 0.69 0.23 0.05 0.03 2010 0.63 0.27 0.06 0.04 2011 0.55 0.33 0.08 0.04 Among Vehicle Buyers 2009 0.16 0.34 0.32 0.19 2010 0.11 0.27 0.32 0.3 2011 0.09 0.26 0.34 0.31

Fraction of Households by Monthly Income (Yuan)

Source: Ford Automobile Buyer Survey 2009-2011 and Annual Statistical Yearbook 2009-2011.

Segments: mini/small sedan, compact sedan, medium/large sedan, SUV, MPV Household income distribution for each segment ⇒ micro moments

(Cornell) Local Protectionism June 2016 23 / 50

Overview

2 Introduction 3 Theory 4 Industry Background and Data 5 Estimation and Results 6 Simulations and Welfare Analysis 7 Conclusion (Cornell) Local Protectionism June 2016 24 / 50

Two Key Steps

1 Identify local protection: separate it from other factors 2 Estimate its welfare impacts: a structural model (Cornell) Local Protectionism June 2016 25 / 50

Two Key Steps

1 Identify local protection: separate it from other factors 2 Estimate its welfare impacts: a structural model (Cornell) Local Protectionism June 2016 25 / 50

Berry-Logit Model

ln( sjmt s0mt ) = β1LCLjm + β2LCLjmSOEj + β3LCLjmJVj +Xjθ − αPj + τBj + δm + ηt + ξjmt sjmt: quantity share of model j in province m and month t LCL: a dummy for local products. Two types of local products:

◮ HQ: 1 if j is produced by a firm headquartered in market m ◮ Plant: 1 if j is produced by a firm with a plant in market m

Bj, δm, ηt: brand, province, and year fixed effects Separate regressions for individual and institution purchases Parameters of interest: β1, β2, β3, which capture home bias

(Cornell) Local Protectionism June 2016 26 / 50

Local Protectionism: Modeling considerations

Besides official documents discussed above, government protection against non-local firms can take many forms and is often hidden:

◮ Direct or indirect subsidies ◮ Entry barriers for dealers of nonlocal brands

For modelling purposes, we model local protectionism as affecting consumer preference for local brands:

◮ Private brands enjoy little protection from the government. Its

coefficient captures consumer preference that is not driven by policy

◮ The home bias for SOEs and JVs above that of private firms is

considered as driven by local protectionism

(Cornell) Local Protectionism June 2016 27 / 50

Instrumental Variables

Prices are instrumented by BLP instruments and consumption tax. BLP IVs:

◮ Number of products within the same segment by the same firm, or by

rival firms

Consumption tax rate:

Engine Size Before 9/1/08 After 9/1/08 1.0L or below 3% 1% 1.0 - 1.5L 3% 3% 1.5 - 2.0L 5% 5% 2.0 - 2.5L 9% 9% 2.5 - 3.0L 12% 12% 3.0 - 4.0L 15% 25% above 4.0L 20% 40%

(Cornell) Local Protectionism June 2016 28 / 50

Logit Parameter Estimates

OLS IV I IV II IV III Variables Est. S.E. Est. S.E. Est. S.E. Est. S.E. HQ*Private 0.02 0.12 0.01 0.16

• 0.10

0.16 0.04 0.15 HQ*JV 0.65 0.06 0.94 0.06 0.81 0.07 0.66 0.06 HQ*SOE 1.32 0.10 1.59 0.09 1.46 0.10 1.32 0.10 Plant*Private 0.01 0.09

• 0.04

0.13

• 0.06

0.13 0.02 0.13 Plant*JV

• 0.07

0.06 0.23 0.06 0.20 0.06

• 0.07

0.06 Plant*SOE 0.45 0.22 0.29 0.19 0.33 0.19 0.45 0.18 Ln(price)

• 0.40

0.06

• 3.07

0.18

• 3.07

0.18

• 3.02

0.18 Distance

• 0.06

0.01

• 0.08

0.01

• 0.05

0.01

• No. of Dealers

0.01 0.00 0.01 0.00

• No. of observations

19624 19624 19624 19624 Two comparisons:

◮ Local vs. non-local products: consumer preference ◮ Local private vs. local SOEs/JVs products: local protection

Control for vehicle attributes, brand, year, and vehicle-type-by-province fixed effects

(Cornell) Local Protectionism June 2016 29 / 50

Logit Parameter Estimates

OLS IV I IV II IV III Variables Est. S.E. Est. S.E. Est. S.E. Est. S.E. HQ*Private 0.02 0.12 0.01 0.16

• 0.10

0.16 0.04 0.15 HQ*JV 0.65 0.06 0.94 0.06 0.81 0.07 0.66 0.06 HQ*SOE 1.32 0.10 1.59 0.09 1.46 0.10 1.32 0.10 Plant*Private 0.01 0.09

• 0.04

0.13

• 0.06

0.13 0.02 0.13 Plant*JV

• 0.07

0.06 0.23 0.06 0.20 0.06

• 0.07

0.06 Plant*SOE 0.45 0.22 0.29 0.19 0.33 0.19 0.45 0.18 Ln(price)

• 0.40

0.06

• 3.07

0.18

• 3.07

0.18

• 3.02

0.18 Distance

• 0.06

0.01

• 0.08

0.01

• 0.05

0.01

• No. of Dealers

0.01 0.00 0.01 0.00

• No. of observations

19624 19624 19624 19624 Two comparisons:

◮ Local vs. non-local products: consumer preference ◮ Local private vs. local SOEs/JVs products: local protection

Control for vehicle attributes, brand, year, and vehicle-type-by-province fixed effects

(Cornell) Local Protectionism June 2016 29 / 50

Logit Parameter Estimates

OLS IV I IV II IV III Variables Est. S.E. Est. S.E. Est. S.E. Est. S.E. HQ*Private 0.02 0.12 0.01 0.16

• 0.10

0.16 0.04 0.15 HQ*JV 0.65 0.06 0.94 0.06 0.81 0.07 0.66 0.06 HQ*SOE 1.32 0.10 1.59 0.09 1.46 0.10 1.32 0.10 Plant*Private 0.01 0.09

• 0.04

0.13

• 0.06

0.13 0.02 0.13 Plant*JV

• 0.07

0.06 0.23 0.06 0.20 0.06

• 0.07

0.06 Plant*SOE 0.45 0.22 0.29 0.19 0.33 0.19 0.45 0.18 Ln(price)

• 0.40

0.06

• 3.07

0.18

• 3.07

0.18

• 3.02

0.18 Distance

• 0.06

0.01

• 0.08

0.01

• 0.05

0.01

• No. of Dealers

0.01 0.00 0.01 0.00

• No. of observations

19624 19624 19624 19624 Two comparisons:

◮ Local vs. non-local products: consumer preference ◮ Local private vs. local SOEs/JVs products: local protection

Control for vehicle attributes, brand, year, and vehicle-type-by-province fixed effects

(Cornell) Local Protectionism June 2016 29 / 50

Sales Impacts of Home Bias

HQ*Private HQ*JV HQ*SOE Individual 4.08% 93.48% 232.01% Institution 24.61% 156.00% 560.09% Plant*Private Plant*JV Plant*SOE Individual 0.02%

• 7.69%

75.07% Institution 13.88% 0.72% 15.03%

SOE’s sales in the home market is higher by 232% on average for individual purchases, and by 560% for institutional purchases Bai et al. (2009): industries with more SOEs exhibit stronger protectionism:

◮ Local governments have more to gain from protecting SOEs ◮ “As local government officials hold the right to appoint the chief executives

• f SOEs, they have many more ways of milking the SOEs as compared with
• ther enterprises.”

(Cornell) Local Protectionism June 2016 30 / 50

Boundary Discontinuity Analysis

To address unobserved preference, focus on counties that share provincial boarders Assume the same unobserved preference for different models in each county-cluster

(Cornell) Local Protectionism June 2016 31 / 50

Boundary Discontinuities: Counties

All Clusters Clusters Clusters Est. SE Est. SE Est SE Est SE HQ*Private

• 0.11

0.04

• 0.05

0.07 0.12 0.08 0.12 0.11 HQ*JV 0.66 0.03 0.53 0.05 0.42 0.04 0.40 0.05 HQ*SOE 1.09 0.03 1.00 0.05 0.93 0.07 0.85 0.09 County FE Yes Yes Yes Yes Year FE Yes Yes Yes Yes Model FE Yes Yes Yes Yes Cluster-model FE No No Yes Yes

• No. of obs.

751518 195348 195348 96706

• No. of clusters

2179 578 578 328 The last column restricts to clusters where the ratio between the highest and lowest GDP per capita is no larger than 1.6

(Cornell) Local Protectionism June 2016 32 / 50

Structural Estimation: BLP

A random coefficient discrete choice model of vehicle demand with rich consumer heterogeneity:

1 Define consumers’ choice set: all available vehicle models; each

choice is defined as a bundle of attributes

2 Define household utility function over product attribute space with

preference heterogeneity

Go to utility function 3 Generate household choice probabilities and aggregate to market

shares

4 Match predicted market shares of different vehicle models with

• bserved market shares

5 Estimate preference parameters and conduct welfare analysis (Cornell) Local Protectionism June 2016 33 / 50

Utility Function

Each year, a household decides whether to buy a new vehicle and what to buy among J models. Choice set: {0, 1, 2, ....J} We model local protection as price discounts for local products Utility from vehicle model j: umtij = αmtipmtj +

K

• k=1

Xmtjk ˜ βmtik + δm + ηt + ξmjt + ǫmtji αmti = e ¯

αmti+α1lnymti+σνmti

pmtj = p0

tj ∗ (1 − γ1LCLmjJVj − γ2LCLmjSOEj)

˜ βmtik = ¯ βk + σkνmtik Arranging terms, we have: umtij = δmtj(θ1) + µmtij(θ2)

(Cornell) Local Protectionism June 2016 34 / 50

Choice Probabilities and Market Shares

Utility from not buying: umti0 = ǫmti0. ǫmtij, j = {0, 1, ..., J}: i.i.d. type I extreme value distribution Define the probability of household i choosing vehicle model j: Prmtij = exp(δmtj(θ1) + µmtij(θ2)) 1 +

h[exp(δmth(θ1) + µmtih(θ2))]

Aggregate individual choice probabilities to get market shares: Smtj =

• PrmtijdF(µmtij(θ2))

(Cornell) Local Protectionism June 2016 35 / 50

Estimation Strategy

Simulated GMM with nested contraction mapping Inner loop:

◮ BLP contraction mapping to recover the mean utility δmtj conditional

• n individual specific parameters θ2

Outer loop:

◮ Form aggregate moment conditions based on the recovered mean

utility: observed vehicle attributes and instruments are uncorrelated with unobserved product attributes

◮ Form micro-moment conditions based on simulated household choices ◮ Stack both sets of moment conditions, properly weighted, to form

GMM objective function

(Cornell) Local Protectionism June 2016 36 / 50

Supply Side

Firms maximize static profit by choosing prices: πf =

M

• m=1
• j∈F
• (p0

j − tj(p0 j , Xj) − mcj)qjm(p0, θ)

• FOC:
• h

(p0

h − th − mch)∂Qh

∂p0

j

+ Qj(1 − ∂tj ∂p0

j

) = 0 The equilibrium price in matrix notation: p0 = mc + ∆−1q(p0, θ) ∆jh =

• − ∂Qh

∂p0

j

if models j and h produced by same firm

• therwise

(Cornell) Local Protectionism June 2016 37 / 50

Parameter Estimates: Part 1

(1) (2) Est. S.E. Est. S.E. LCL*JV, γ1 0.11 0.02 0.12 0.02 LCL*SOE, γ2 0.23 0.03 0.26 0.03 e ¯

α(e ¯ α1)

1.42 1.05 0.77 0.72 e ¯

α2

1.56 1.17 e ¯

α3

0.75 0.46 e ¯

α4

1.95 0.84 ln(income), α1

• 2.23

0.31

• 2.45

0.32 The first specification requires taste for price to vary continuously with income. The second specification allows each income group to have a distinct base taste for price Both control for vehicle attributes, brand, year, and vehicle-type-by-province fixed effects

(Cornell) Local Protectionism June 2016 38 / 50

Parameter Estimates: Part 2

(1) (2) Est. S.E. Est. S.E. Ln(fuel cost)

• 1.86

0.31

• 1.21

0.29 Ln(engine size) 4.37 0.37 4.11 0.39 Ln(vehicle size) 9.39 0.55 8.66 0.51 Auto Transmission 0.88 0.08 0.84 0.06 Dealer 0.07 0.01 0.07 0.01 Distance(1000km)

• 0.11

0.02

• 0.10

0.02 Random Coefficients σ for price 1.45 0.11 1.57 0.08 σ for constant 4.05 0.92 2.87 0.54 σ for ln(fuel cost) 0.28 0.10 1.18 0.13 σ for ln(engine size) 1.44 0.61 1.25 0.89 There is a large dispersion of price sensitivity even at a specific income level

(Cornell) Local Protectionism June 2016 39 / 50

Price Elasticities

The range of price elasticity is -2.87 to -6.43, with a mean of -4.87

(Cornell) Local Protectionism June 2016 40 / 50

Net Profit Margins

Net profit margin varies from 16.3% to 36.0%, with a mean of 22.2%

(Cornell) Local Protectionism June 2016 41 / 50

Overview

2 Introduction 3 Theory 4 Industry Background and Data 5 Structural Model and Results 6 Simulations and Welfare Analysis 7 Conclusion (Cornell) Local Protectionism June 2016 42 / 50

Impact of Local Protection on Prices (2009)

‐4% ‐3% ‐2% ‐1% 0% 1% 2% 3% 4% 5% 6%

All private firms cut prices after local protection is introduced Price response by SOEs and joint ventures are mixed

(Cornell) Local Protectionism June 2016 43 / 50

Impact on Home-market Sales (2009)

5000 10000 15000 20000 25000 30000 35000 40000 Sales with local protection Sales without local protection

Local protection more than doubles home market sales for most SOEs. Home-market sales by move JVs increase marginally

(Cornell) Local Protectionism June 2016 44 / 50

Impact on Total Sales (2009)

‐2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Total sales increase by about 40,000, or 0.6% of existing sales SOEs and JVs gain sales at the expense of private firms

(Cornell) Local Protectionism June 2016 45 / 50

Welfare Impacts

Loss of consumer surplus:

◮ Choice distortion – local protectionism leads to suboptimal choices ◮ Price effect – firms raise prices due to increased market power in their

home markets

Loss of producer surplus:

◮ Production distortion – production shifts to high-cost producers

Other welfare losses:

◮ Welfare loss from taxation to finance local protection (i.e., through

subsidies)

◮ Dynamic impacts on entry and exit, capacity utilization, and resource

allocation across regions

(Cornell) Local Protectionism June 2016 46 / 50

Consumer Welfare Loss by Province (2009)

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7

Welfare loss(bn yuan)

Original Price New Equilibrium Price

We measure welfare loss by the difference between total subsidies and the total lump-sum transfers that would make consumers as well-off Total welfare loss is 3.5 billion yuan in 2009, out of which 2.0 billion is driven directly by local protection, while the other 1.5 billion is driven by price changes induced by local protection

(Cornell) Local Protectionism June 2016 47 / 50

Impact on Firm Profits (2009)

‐2% 0% 2% 4% 6% 8% 10% 12% 14%

Total profits increase by 2.5 billion yuan, or 1.37% percent of current profits Percentage profit changes for private firms, SOEs and JVs are -1.76%, 4.17%, and 1.35%, respectively.

(Cornell) Local Protectionism June 2016 48 / 50

Conclusion

Strong local protectionism exists in the auto market:

◮ More than doubles the sales of local SOEs ◮ Increases the sales of local JVs by 70%

Leads to choice distortions and welfare loss:

◮ About 12 billion Yuan ($1.9 bn) from 2009 to 2011 ◮ Taxation and subsidies are considered transfers and not included in the

welfare analysis. Losses from taxation is excluded from our current analysis

◮ The policy has benefited rich car buyers at the expense of the average

taxpayer

(Cornell) Local Protectionism June 2016 49 / 50

Conclusion

Dynamic inefficiencies of local protection:

◮ Diverts production from low-cost producers (JVs and private firms) to

high-cost producers (SOEs)

◮ Leads to a large number of inefficient firms ◮ Induces excess capacity and low capacity utilization

Although China has made great stride in integrating with the world economy, intra-country trade barriers still exist

◮ Future reform that aims at eliminating local barriers and facilitating a

national market would help economic growth

(Cornell) Local Protectionism June 2016 50 / 50